Originally published September 15, 2020
During this period I continue to manage risk by swapping out Gilead for United Health Group within my Health Sector group. The main reason for this change is to increase diversification, as all my health sector positions are biopharmas concentrated in drug discovery. At face value, they are all very different companies but they are all nevertheless in the same business so it’s prudent to try and diversify this sector/group. GILD is being sold at a 20% loss, so there are some tax selling advantages considering some of the huge gains in other stocks I recently sold. UNH is, in my opinion, a more well-diversified company involved in health services, insurance, software, etc. They are also a more consistent grower of earnings, and relatively a safer investment from a size perspective as it’s a huge company. UNH may also benefit more than most should spending in the health sector be increased due to the aftermath of the pandemic.
The portfolio continues to beat the Sp500 by 5.5 points and the Canadian TSX by 15 points. As discussed in previous newsletters, the TSX is a more concentrated index, not well balanced because the Canadian Economy is itself not well balanced. So when Oils and Financials are out of favour as they are now, the Canadian Index will underperform relative to everyone else. One day it will surely beat the US and world indexes, but who knows when? And it will always be biased toward financials, energy, and resources. This is why I always advise a worldwide diversification strategy.
Gold is Getting Hot
There continues to be a lot of noise in the markets ie speculation about market bubbles, and end of the world talk. As a result, Gold is getting hot, and even Warren Buffet has bought in if you believe the hype. In reality, a sub-lieutenant at Berkshire likely made the purchase on his own, and the amount is a rounding error relative to the value of Berkshire. It’s not a relevant position! So it does not mean anything. So do not get caught up in the gold fever, it’s always a speculative play. Interestingly Berkshire has become an Apple and Bank of America fund as these two positions alone represent more than 50% of the fund. This is not a strategy I would ever recommend to anyone.
Where is the market going now?
A couple of months ago, I was pretty confident that it was going to be up. Now that it’s up, will it continue? I am cautiously optimistic at this point, but admittedly there are a lot of moving parts with the pandemic and its eventual secondary effects… trade wars, US elections, and recent alien sightings. I think it’s likely that volatility will remain high till the end of the year and certainly in 2021. It’s really hard to say for sure, and that is why I am tweaking the portfolio to not be overly exposed to major reversals in the market.
What to do with Marc’s Really Risky Option Strategy?
My Sp500 index option is returning +20% after being down over 60% in March. The original strategy was to sell it this December when it expires, but this was a pre-covid purchase/strategy. Ultimately, I think I should take the money and run although there is a good chance that I may end up forgoing much more profit. I will likely let it ride a few more weeks but it’s likely that the better strategy would be to lower my exposure to the market by selling the option. Thankfully it’s above water at this point, for now.
Happy investing.
Marc’s Monthly Moves
| Buy | Sell |
| United Health Group (UNH) | Gilead (GILD) |
Marc’s Portfolio YTD Returns
- Portfolio return 11.2% (Including currency gains)
- Portfolio return 10.2% (without currency gains)
- Sp500 return 4.65%
Note: Portfolio beating Sp500 by 5.5 points
Money with Marc 